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One of the big queries that comes up at every pre-retirement seminar is "Do I need Medicare -- especially Part B? Or should I stick with the benefits I can continue to receive into retirement under the Federal Employees Health Benefits Program?" The answer is, it depends. That's not what you probably wanted to hear, I know. Let's look at some of the factors in play here.

First, some definitions. Medicare Part A pays for inpatient hospital stays, care at skilled nursing facilities and some home health care. Part B is insurance that helps pay for doctors' services and outpatient care. It also covers other medical services, such as physical and occupational therapy, and some home health care.

That may sound like a pretty good package, but Medicare A and B is not enough insurance by itself. Even the combination of the two does not include catastrophic coverage benefits, for one thing. If you only had Medicare, and had to be hospitalized for more than 60 days, your co-pay would be almost $250 per day. And Medicare pays nothing if you are hospitalized more than 150 days.

Also, the cost of Part B premiums has gone up a lot since they were $3 per month in 1966. Even up until 2000, the premium was under $50 a month. But now the costs are much higher, and a new law has changed how Part B premiums are calculated for some people with higher incomes. The bottom line is that depending on income, coverage costs between $93.50 and $161.40 a month, or $1,122 up to $1,936.80 per year. Some retirees are beginning to question the value of this coverage.

Pondering Part C

If you have Part A and B coverage, you can join a Medicare Advantage plan, also known as Medicare Part C. This is an HMO that contracts with Medicare. Services must be obtained from the HMO's network of doctors and hospitals to receive full benefits. The HMO may charge a monthly premium and require co-payments.

With one of these plans, you do not need your FEHBP coverage, because Medicare Advantage plans generally offer many of the same benefits that an FEHBP policy would provide, such as extra days in the hospital after you have used the number of days that Medicare covers.

Some of the FEHBP HMOs, however, also offer a Medicare Advantage option. And some of these HMOs will coordinate coverage to your advantage if you enroll in both their FEHBP HMO and their Medicare Advantage plan. For example, in one of the FEHBP HMOs, for members with both Medicare Parts A and B, Medicare covers hospice care for those who receive care from any Medicare-certified hospice. Members with Medicare Part B only must receive care from HMO network providers. Check your plan's Web site to see how it coordinates with Medicare.

Also, those who use FEHBP HMO coverage should remember that with Medicare coverage, you may use doctors outside of your HMO network and receive Medicare benefits for these services.

Military Matters

Before we go any further on the FEHBP-Medicare issue, let's take a quick detour to look at issues for military service members and retirees. They and their families have their own issues to consider, relative to the military's TRICARE managed health program.

When TRICARE beneficiaries (other than eligible active-duty family members) become entitled to Medicare Part A, and purchase Medicare Part B, they do not experience a break in TRICARE coverage. The TRICARE for Life program, which covers retirees, pays secondary to Medicare.

There are no enrollment fees for TFL. Beneficiaries, other than active-duty family members, are required to purchase Medicare Part B. For more information, see the TRICARE section of Military.com.

By law, some military veterans over 65 have secondary coverage to Medicare under the Civilian Health and Medical Program of the Department of Veterans Affairs. CHAMPVA provides similar benefits as those provided to military beneficiaries under the TRICARE or TRICARE for Life.

If you have TRICARE For Life or CHAMPVA benefits along with Medicare A and B, you have very good health coverage and would not need to have FEHBP coverage. If you carry FEHBP coverage into retirement, you may suspend this coverage to use your TRICARE benefits.

Bottom Line

So what about those who aren't eligible for TRICARE and who want to remain in an FEHBP fee-for-service setup, such as the Blue Cross Blue Shield Service Benefit Plan?

This is where the decision about whether to enroll in Medicare Part B can get stickier. The first thing to know is that your FEHBP plan will cover you after 65 even if you do not enroll in Medicare. But your FEHBP plan would like for you to enroll in Medicare, since Medicare would then be the primary payer of your health care expenses. So what are they going to offer you as an incentive?

As I showed you in the HMO example above, there will be less out-of-pocket expense if you have Medicare as your primary coverage. Most fee-for-service FEHBP plans will waive deductibles and co-pays if Medicare A and B are your primary insurance. Look at your plan's brochure or check out its Web site to learn about the coordination with Medicare.

You generally won't need to use the preferred providers when Medicare is the primary payer, as long as you use doctors and facilities that accept Medicare patients. But be sure to check to see how much the catastrophic out-of-pocket limits are. This is how much you might be spending if you don't pay the $1,122 to $1,936.80 per year for Medicare Part B.

Over your lifetime, it's possible to have out-of-pocket medical expenses that would exceed the cost of enrolling in Medicare Part B. These could be mostly eliminated by Medicare enrollment. If you wait to sign up for Medicare until later, you will face even bigger premiums. If you think that Medicare Part B is expensive, imagine how much your expenses will be in the event of a chronic illness or serious medical condition -- especially when you are living on a fixed income in retirement.

Here's my bottom-line advice: Take Medicare at 65 if you are retired. If you are still working and over 65, you still have some time to decide, if you are carrying your FEHBP coverage as an employee.

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.